Whistleblower - Small Business Administration Fraud

Whistleblowers play a critical role in keeping our countries institutions honest. There are whistleblower protections for individuals who report fraud involving the U.S. Small Business Administration (SBA) programs or employees. If you are a federal employee, an employee of a contractor, subcontractor, or grantee, reporting information about fraud, waste, or abuse in the SBA’s activities, you are a whistleblower.

Government contracts over $500,000 have to include small business subcontracting plan to enable small business to get work on large projects. To qualify as a small business that can benefit, the company must have less than 500 employees and less than $5 million in annual revenue. The idea is to open up the market to smaller business who would not otherwise have the opportunity. Unfortunately, many contractors lie about being eligible as a small business under this program to get work on a profitable project. Not only does this defraud the government, but it takes a valuable opportunity away from a business that likely needs it much more.

Acknowledging that this fraud is difficult to catch at the outset, the SBA instituted a “Presumed Loss Rule,” which sets forth the consequences of this type of fraud. The rule states that a fraudulent company can be held liable under the False Claims Act for three times the amount they receive from a contract under which it lied about qualifying as a small business. This applies even if the government enjoyed the benefit of the companies work. The rule also allows for liability on a prime contractor who does not do their due diligence in reviewing the size of the company it is hiring as a subcontractor. It effectively incentivizes contractors to check beforehand if the subcontracting company is actually eligible as a small business.

The Government Accountability office has recently targeted the SBA alleging rampant fraud regarding small business loans in response to COVID-19. More than 4.7 million businesses have taken out these loans under the Paycheck Protection Act. The speed at which loans were approved and the lack of oversight makes it likely that several fraudulent applications were approved. It is also likely that borrowers may misuse loans. The SBA has been slow to cooperate with authorities. While unclear, it is likely that SBA whistleblower protections will apply to company insiders who expose this fraud as well.

The reward is between 15-25% of the amount the government recovers from the fraudulent company. To receive a reward of $1 million, the amount recovered must be $5 million or more. If you know of a company who is defrauding the government by lying about qualifying as a small business, you may be entitled to a reward for reporting the misconduct.

Protections prohibit government personnel from retaliating against you for reporting evidence of illegal activity, mismanagement, waste of funds, abuse of authority, dangers to public health or safety. Some disclosures may be prohibited by law or Executive Order. We can help you determine the best way to proceed. We understand that coming forward about a company’s fraud can be intimidating, but our priority is protecting you rights and your livelihood. Whistleblowers help preserves the ideals of our country, and that is worth protecting.

It is important that fraudulent activities be reported, and the perpetrators be held accountable for their misdeeds. The attorneys at Altman & Altman LLP can help ensure that you are compensated for blowing the whistle should you be the one to provide the crucial information to bring about a financial penalty against the perpetrator. We can help retain your anonymity in certain cases, and will ensure you have the best chance to collect a reward for your actions.

Contact us online or call for a free consultation to go over the details of your case today at 617-492-3000 or toll-free at 800-481-6199. We are available 24/7.